Carlsberg hit by Russia sales and rising costs

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City A.M. Reporter

DANISH brewer Carlsberg said yester- day it had scrapped its profit margin target for eastern Europe, blaming volatile markets and raw material costs, and dampening hopes the region can offset sluggish demand in western Europe.

The world’s fourth-biggest brewer said that sales growth had stalled in its key Russian market and the cost of an efficiency drive in western Europe would cap earnings growth this year, sending its shares down as much as seven per cent.

“Several events, both within and beyond our control, have and will con- tinue to impact margins,” Carlsberg said as it scrapped its target for an operating profit margin of 26-29 per cent for eastern Europe by 2015. The group made an operating margin in the region of 21.7 per cent in 2011.

Carlsberg did give a longer-term tar- get for average growth in adjusted underlying earnings per share of more than 10 per cent per year.

However, it forecast operating earnings this year would reach only around 10bn Danish crowns (£1.16bn) from 9.8bn in 2012.

Carlsberg said an efficiency drive in western Europe, which includes centrally managing all procurement, production, planning and logistics, would hurt in the short term. The revamp, while helping operating margins in the region in the long term, will cost 300-400m crowns this year, 400-500m in 2014 and 500m in 2015, it said.